Friday 25 July 2014

Keppel Corp

UOBKayhian on 25 Jul 2014

FY14F PE (x): 12.2
FY15F PE (x): 11.6

Within our expectation. Keppel reported a net profit of S$406m (+17% yoy) and S$745m (+6% yoy) for 2Q14 and 1H14 respectively. 1H14’s net profit was 46% of our 2014 net profit forecast of S$1.62b. 2Q14’s net profit of S$406m was 14% higher than 1Q14’s S$357m. An interim DPS of 12.0 S cents has been declared (1H13: 10.0 S cents excluding special dividend in specie).

Forecasts are unchanged. We maintain our 2014-16 earnings forecasts. Risks to our earnings forecasts are lower-than-expected contract wins, worse-than-expected O&M margins, and lower-than-expected infrastructure and property earnings contributions. Maintain BUY and target price of S$13.50, based on the sum-of-the-parts valuation which values Keppel’s O&M business at 15x 2015F PE. Keppel remains our preferred large-cap O&M stock pick.

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